Labor Costs Fall Sharply in a Likely Tax-Driven Blip

WASHINGTON—Labor costs for U.S. businesses plunged in the first three months of 2013, partly reversing a surge driven by tax considerations in the prior quarter, while productivity grew slowly amid a tepid expansion.

The drop in labor costs was tied largely to temporary effects of tax policy. Some companies moved payments forward late last year in anticipation of a tax increase, causing compensation to spike in the fourth quarter and...